Chancellor George Osborne has announced details today of the changes to the tribunal system, which will take effect from April 2012.  In a nutshell, these are:

a)      The qualifying period for an unfair dismissal claim will rise from 1 to 2 years service (although there is no change to those areas which currently require no service to bring a claim, e.g. discrimination)

b)      A fee for lodging a tribunal claim, which it is being suggested will be £250 with an additional fee of £1000 when the case is listed (although it is also being suggested that those with “no money” – i.e. on income support – will be exempt from this fee). If the individual wins their claim they will have their fees refunded.

While many business organisations have welcomed the changes, there is a potential sting in the tail for small businesses in that the cost of settling claims before a hearing may increase significantly – with a consequence that more hearings may actually end up before a tribunal.

Consider this scenario: Bill is sacked by Acme Ltd, a small business with 30 employees. He pays out his £250 and makes a claim for unfair dismissal in Liverpool. The Liverpool tribunal office are currently very fast at scheduling hearings and so Bill has to pay out another £1000 very shortly afterwards. Acme and their advisers review the case and decide that, while they think Bill is unlikely to win, the time and cost of going to a hearing are just not worth their while.  They decide they are prepared to offer a “nuisance value” settlement of £1000. “No chance” says Bill. “I’ve already paid out £1250 which I’ll lose if we don’t go to tribunal. I’m still aggrieved and think I have a case but I would take £1000 on top of that as I’ve now got a new job”.  Either Acme and Bill settle for £2250, a lot more than Acme wanted to pay, or the case goes to a hearing and – even if Acme win – they have paid out more in adviser fees and wasted at least a day of senior managers time.

So who really wins out of this?